Speakers at EMTA Forum in Hong Kong Discuss the “Sugar Highs” of International Stimulus Efforts
“All of us were surprised at how quickly the markets bounced back…the negativity of late last year is a distant memory,” observed Tim Condon (ING) at the beginning of EMTA’s fourth annual Forum in Hong Kong. The lunchtime event, which drew over 100 market participants, was held on Friday, October 30, 2009 and was sponsored by ING. Panelists debated the effects of global stimulus measures, the prospects for rate hikes, potential asset bubbles and their top investment picks.
Condon, who moderated the Forum’s panel discussion, asked speakers for their reactions to the market rebound and thoughts on market direction. Cecilia Chan of HSBC Halbis noted that the recovery has been remarkably smooth while cautioning investors not to forget the past. She added that there was widespread assumption that governments were “doing the right thing” but such an assumption –which was supporting current sentiment—was quite a large one.
Citigroup’s Johanna Chua observed that “we have never been through this sort of crisis…and we are all viewing a grand social experiment.” She added to the vast debate on the shape of the global recovery by suggesting it could be “square root-shaped.”
Income Partner’s Jiffriy Chandra discussed the unprecedented coordination by Central Banks in their actions to stimulate the international economy. However, he warned that, “like being pumped up with steroids for a cold….we are not sure what the long-term effects will be.” Chandra believed that Asia has returned to a more regular business cycle, and that the fundamental improvement in the Asian economies over the past 10-15 years has helped buttress the global EM recovery.
Vijay Chander of Standard Chartered added his own colorful metaphors, calling policy measures “sugar highs” designed to “pump up a fl at tire.” He underscored the inconsistent policy responses to the collapses of giant US fi rms as contributing to market uncertainty over the past year while acknowledging that policy makers “were making things up on the fl y.” He viewed debt instruments as being “priced to perfection” and expressed skepticism that current levels could be sustained.
Condon polled speakers for their thoughts on exit strategies, following rate hikes in Australia, hawkish posturing by India’s Reserve Bank and speculation that other Asian central banks could move to tighten rates. Chan noted that while some Asian banks are concerned by potential property bubbles, rate hikes are not the best solution as they will hurt the real economy. Chandra expressed caution although he didn’t expect a dramatic near-term change. “Everyone thinks they will get out in time….but I don’t think so!” he stated.
Most speakers concurred that Indonesia was justifi ably a “market darling”. Chan saw the currency as a strategic play even before a pricing correction, while Chander believed most debt spread tightening had already occurred. Condon himself was perhaps the most bearish on a short term basis, though acknowledged he was a long-term bull.
How can investors make the most money over the next twelve months? Chan joked that betting on horses was probably more lucrative although she recommended the KRW and IDR vs. the dollar. Chua agreed on the won and rupiah, adding the INR and possibly the Philippine peso. Chander spoke positively on ICICI perpetual bonds, selected Chinese high-yield property issuers and Korean quasi-sovereigns KDB and KEPCo.